STATES SAY COURT RULING MAY HIKE PHONE RATES

Local phone rates would go up by as much as $1 billion nationwide if the U.S. Supreme Court upholds a lower court ruling giving the federal government new powers over phone charges in each state, the justices were told Monday.

The warning came during arguments in an appeal by four states, including Florida, to block the Federal Communications Commission from ordering certain rate structures, which would force local rates to rise faster than previously anticipated.

A Florida Public Service Commission analyst has estimated that phone rates in the state will be increased by $15 million to $20 million annually unless the high court overturns a June 1984 federal appeals court decision extending FCC control over local ratemaking decisions.

The estimated impact on the average Florida customer would be an increase of between $3 and $4 every year.

The outcome of this case will affect nearly 5.6 million customers of Southern Bell and General Telephone and Electronics Corp., which provide phone service to nearly all of the state. Smaller companies in the state do not come under the FCC's jurisdiction.

A separate appeal to the 1984 decision, brought by the Maryland Public Service Commission, also was heard by the Supreme Court Monday.

"That decision, if upheld by this court, would require local rate-payers to pay substantial rate increases," said Lawrence G. Malone, an attorney for the New York Public Service Commission, who represented the states in the consolidated appeal.

"Those rate increases would cause business customers to go off the network, which then, of course, would force rates to continue upward," Malone predicted. "It really has a spiraling effect."

But U.S. Solicitor General Charles Fried, arguing in support of the FCC and several phone companies, said these companies had lost $20 billion as a result of "too slow depreciation" over phone equipment used jointly for intrastate and out-of-state phone service. This money, Fried said, can never be recovered.

At issue in this case is whether the state public service commissions or the FCC can determine the rate of depreciation telephone companies can use in determining their annual rates of return. Since depreciation costs are a major factor in setting local rates, the accelerated rates of depreciation which the FCC, "at the behest of the industry," began ordering the states to adopt in 1983 will force these rates to increase significantly, Malone argued.

So far, 23 states, including Florida have resisted letting the FCC dictate the intrastate rates of depreciation on telephone poles lines and switching systems, Malone said.

Mark Wilkerson, a financial analyst with the Florida Public Service Commission, said in an interview Monday that phone rates would not increase as dramatically in Florida as in other states. Florida already allows higher annual rates of depreciation, he said.

"If we were on our own, the rates would go up anyway," Wilkerson said, "but not as much as it would if the FCC is on its won."

Wilkerson said state officials can do a better job of determining what rates of depreciation should be allowed because the states have more staff members for this task than the FCC and are better informed on local conditions affecting depreciation.

But Michael Boudin, an attorney representing AT&T; and the former Bell System operating companies, told the justices that accurate rates of depreciation are impossible when both the FCC and the state public service commissions claim jurisdiction over the same equipment.

"It is exactly the case of having two hands on the steering wheel," Boudin said.

The equipment in question is used 97 percent for intrastate calls and only 3 percent for calls outside the state, Fried said. But this small amount of interstate usage is still enough to warrant the FCC assuming control over rates of depreciation on this equipment, he argued.

Justice John Paul Stevens asked Fried what would prevent the FCC from claiming control over the entire ratemaking process for intrastate service.

"I think that would be a long stretch and a very serious move which I myself would be hesitant to embrace," Fried replied.